We’ve heard it time and time again since the start of the new year: the economy is on the upswing; job opportunities are increasing; Americans are optimistic about their chances of finding higher-paying jobs. The economy’s uptick and subsequent increased job opportunities were a main point of emphasis during President Obama’s January State of the Union address, and the media has followed suit with enthusiastic reports regarding expectations of pay increases and hiring sprees over the course of the next two years. But some financial experts and analysts, like Founder and CEO of Bennett Group Financial Services Dawn J Bennett, observes that what the President and the pundits are telling us doesn’t match up with actual economic conditions, and investors should take note.
The University of Michigan’s February consumer sentiment numbers are perhaps most telling of this disconnect between the government’s job prospect narrative and actual job outlook and growth. According to the report, fewer Americans are expecting higher incomes and better business opportunities, as numbers fell approximately 3 points from January. The numbers for actual job growth have also been disappointing. March’s growth numbers came in at just 126,000, far below analysts’ prediction of 245,000. The unemployment rate also has yet to decrease as would be expected in a growing economy, as it remains at 5.5 percent.
The Chicago Business Barometer, which measures business activity in the United States, dropped a substantial 14 points from its January numbers, signaling a marked decrease in the economy’s manufacturing sector. As Dawn J Bennett points out, when the Business Barometer sinks below 50 (as it has this February), it’s typically a sign of an impending economic downturn.
These figures accompany the announcement that the United States GDP fell a whopping 43% from the 3rd Quarter to the 4th Quarter in 2014, a far more marked decrease than what analysts had initially predicted. Janet Yellen, Chairwoman of the Federal Reserve, gave further indication of a tepid economy by announcing that the Fed did not have any plans to increase interest rates in the coming year, which, were the economy to be improving, would be a logical course of action. Sustained interest rates are a subtle, yet extremely telling, indication that even the Federal Reserve is wary as to whether the economy will truly gain full steam in the coming months.
So what does this mean for the American investor?
Careful analysis of economic indicators like the Chicago Business Barometer, the University of Michigan consumer sentiment report, shifts in the GDP, and Federal Reserve activity will be essential for successful investment in the coming months. We’re currently in an economy in which public narrative and actual economic conditions wildly differ, and the wise investor will be the one who chooses what they pay attention to very carefully.